Renewable energy: does a solar PV system add up for you?

19 June 2017

By Rebecca Milligan

Solar PV panel prices are tumbling, but so are government subsidies. We look at how to calculate whether it’s worth investing in solar power for your home

Solar power has been hitting the headlines recently, as good weather and increased numbers of solar panels around the UK generate record-breaking amounts of energy. At the end of May 2017 solar panels generated around a quarter of the UK’s energy needs on a single day.[1] And earlier in 2017, Friday 21st April marked the first coal-free energy generation day since the industrial revolution, thanks in part to the growth of solar power.[2]

Read on for more about how to weigh up the potential savings and costs.

The solar investment calculation

To work out whether you will get a return on investment, you need to offset the cost of the installation and maintenance against the money you will save on your bills, plus the income from generating the electricity itself.

This income is called the Feed-in Tariff and has two parts::

the generation tariff paid for the energy you generate – currently 4.1p per kilo-watt hour (kWh)

the export tariff paid for the excess electricity fed back into the grid – currently 5.03p per kWh.

An average 4 kWp system will generate around 3,400 kWh per year (worth around £140 a year via the feed-in tariff), and an average household will use about half of that. Which? calculations indicate you could save about 40% of your monthly electricity bills..

But there are a lot of variables involved, including but not limited to:

the size of the system,

your geographic location,

the pitch and direction of your roof

how much or little shade will affect the panels (shading)

how you consume energy– for example, if you consume more during the day, when your panels are generating power, then you will save more on your bills

maintenance costs

In order to get a full assessment of your potential return on investment, you need a reputable installer to visit your property to get a full picture of the costs and potential savings involved. Which? Trusted Traders has endorsed solar installers in your area, who can provide advice and guidance.

Reducing installation costs

Clearly you are more likely to get a return on investment if your installation costs are competitive. As with many new industries, there has been a big learning curve and installation costs are dropping as systems become more efficient, with the main reduction coming in the price of the panels themselves. Which? Trusted Traders endorsed solar installers told us that the price of solar photo-voltaic (PV) panels has fallen by 70% - 80% over the last five years.

It’s not just the price of panels that are coming down. Improvements in storage and energy generating capacity are opening up the means to become more independent from large energy companies – you can generate solar during the day, then store it to use at night. Battery technology is in its infancy but is developing fast. Who knows what will be possible in the next few years.

As it develops, energy storage prices are following a similar curve to solar panels. Paul told us, TESLA’s Powerwall 1 came out last year, costing £6,700. It stores enough energy to run a typical home for half a day. This year’s model, Powerwall 2 can store twice the amount of energy – enough to run your house for a full day and can cost as little as £5,400.

Reducing feed-in tariff payments

But it’s not all good news on the costs front. In parallel with the reduction in installation prices, the government has reduced the feed-in tariff, or money paid to you for the energy your panels generate. The rate is currently 4.1p per kWh but this rate is set to reduce every three months and the number of installations which can sign-up to each rate is limited. Further rate falls may be offset by further reductions in the cost of panels, but it could be worth locking into this feed-in tariff while it’s still available. Once you are signed-up to a feed-in tariff, the rate is index linked so will rise in line with inflation and is valid for 20 years.

If you are looking for a return on investment, bear in mind that solar is a long-term prospect. With the reduced Feed-In Tariff, our calculations reveal that the expected net profit over 25 years is £650 for an average system. However, with energy prices from major providers likely to increase at least in the short-term, generating your own power can give you greater control of your energy costs. It is worth getting expert advice to see whether the calculation will work in your favour.

Any reputable company will give you an honest assessment of what you can generate and how much it will cost. We’d recommend checking that your installer is a member of a trade body, such as the Solar Trade Association, or accredited with an organisation like Which? Trusted Traders. In order to qualify for the Feed-In Tariff, your installer (and the products they install for you) must be Microgeneration Certification Scheme (MCS) accredited. Reputable traders will sign up to the Renewable Energy Consumer Code (RECC), which covers how customers should be treated and offers an alternative dispute resolution service.

Many congratulations to Gregor Heating, winner of August 2016’s Which? Trusted Trader of the Month. We spoke to Shaun Williams, their Commercial Director, to find out more about the company and why they won the award